Capital Markets Board of Turkey (the "CMB") has made another set of revisions in the Corporate Governance Principles (the "CGPs") by taking into account the concerns raised by ISE Listed Public Companies. Although the recent revision has eased certain requirements envisaged by the Communiqué Serial: IV, No: 56 and a clarification announcement with respect to the implementation of the CGPs has been made on the date of the publication of the Amendment, discussions, which have been under way since October 2011, do not seem to come to an end. ISE Listed Public Companies still consider mandatory implementation of certain CGPs onerous and seek clarification for certain issues such as the significancy criteria applicable for determining whether a transaction falls under the category of Significant Transaction.

Below is a brief highlight of the key aspects of the Amendment:

  • Under the revised CGPs, at least half of the independent directors serving at the BoD of an ISE Listed Public Company shall either be domiciled in Turkey or shall stay in Turkey for more than six months in a calendar year. Former version of the principle envisaged this requirement for all independent directors.
  • The Amendment makes an addition to the required qualifications of the independent directors and provides that independent directors shall be able to deal with the activities of the company in a manner to follow up the operations of the company and to fulfill the duties that they assume.
  • The Amendment repeals the requirement stating that Significant Transactions (namely transferring or renting out of all or a significant portion of company assets, establishing right in rem on all or significant amount of company assets, granting privileges to third parties or changing the scope and subject of already provided privileges, acquiring or renting significant amount of assets and delisting from the ISE) cannot be executed by ISE Listed Public Companies without the approval of the majority of independent directors and the subsequent approval of the General Assembly. According to the revised principles, Significant Transactions can directly be executed if majority of independent directors provide their consent. Executions of those transactions are subject to General Assembly approval only in cases where majority of independent directors do not approve the transactions and the BoD insists on the execution despite the negative approach of those directors. In such a case, reasons behind the dissenting votes shall be disclosed to the public, notified to the CMB and shall be presented to the General Assembly convened for the approval of the respective transaction.
  • The requirement stating that the number of independent directors shall represent the free float rate of the company has been abolished. As per the revision it is sufficient to have independent directors comprising one-third of the BoD.
  • The strict provision envisaging that independent directors shall be elected for a period of three years has been softened by stating that independent directors shall be elected for a period up to three years.
  • The revised provisions clarifies the merits of the CMB's assessment process with regard to independent board member candidates and concludes that the assessment shall be conducted within the framework of the independency criteria listed in CGPs.
  • The Amendment also makes an addition to the CGPs and states that ISE Listed Public Companies may appoint at least one woman to their Boards. Unlike the above principles requiring mandatory application, the application of this principle is based on "comply or explain" approach.

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